The second component is the cost of sales which includes the costs directly linked to providing the trade. For example this is the cost of buying the products. The formula for cost of sales is opening stock + purchases – closing stock. According to business alpha the cost of sales is 2,647,000. The final component of trading accounts is gross profit; gross profit is the amount of money that is left after the cost of goods sold has been taken away from the stock turnover.
The sum of the market or appraised values of identifiable assets acquired less the fair value of liabilities assumed exceeded the cost to Easton. After revaluing noncurrent assets to zero, there was still some “negative goodwill.” Proper accounting treatment by Easton is to report the amount as A. part of current income in the year of combination. B. a deferred credit and amortize it. C. an extraordinary gain. D. paid-in capital.
1) What are the three sections of a Cash Budget, and what is included in each section? The three sections of a Cash Budget are; Cash receipts, Cash disbursements, and Financing. A cash budget allows you to estimate and track all of the money that comes into and leaves your business. Cash Receipts are any monies your business takes in, such as sales receipts. Cash disbursements show where you must spend some of your money, such as on employee pay, raw materials purchases, and manufacturing overhead costs Financing shows expected payments and the repayments of the borrowed funds plus interest.
Page 484 has formulas!! 6. When the firms maintains a target leverage ratio, we compute its levered value V^L as the present value of its free cash flows using the WACC, whereas its unlevered value V^U is the present value of its free cash flows using its unlevered cost of capital or pretax WACC. 15.3 Recapitalizing to Capture the Tax Shield 1. when securities are fairly priced, the original shareholders of a firm capture the full benefit of the interest tax shield from an increase in leverage 15.4 Personal
Liquidity Ratios Liquidity ratios provide information about a firm's ability to meet its short-term financial obligations. The current ratio is the ratio of current assets to current liabilities: Current Ratio | = | Current Assets | | Current Liabilities | | * Interpretation: Current ratio comes from total assets divided by current liabilities. Current assets include cash, accounts and notes receivable (less reserves for bad debts), advances on inventories, merchandise inventories, and marketable securities. This ratio measures the degree to which current assets cover current liabilities. The higher the ratio the more assurance exists that the retirement of current liabilities can be made.
1. Provide the definitions of throughput, inventory and operational expense given in The Goal. How do they compare with the traditional definitions? Do you find them useful, and why? Throughput is the rate at which the system generates money through sales while inventory is all the money that the system has invested in purchasing things which it intends to sell.
Ricardo Viejo MISM 2301 8:00 AM Case Study #1 01/05/10 Fast Fit Case Study 1. Mark the main flows of goods and money in the diagram (above) and employ a key or table of descriptive elements to explain your answer. 3 Customer Warehouse Store Supplier HQ 1 2 4 5 6 3 Customer Warehouse Store Supplier HQ 1 2 4 5 6 1. Customer pays money for products to store. 2.
Prepare Post Closing Trial Balance Ratios 1. Debt ratio = Total liabilities Total assets Purpose: Show the ability of the company to repay its obligations when a company finances the purchase of assets using debt. A company with a low debt ratio will not have difficulty making the required payments. Generally a debt ratio below .60 is desirable. A ratio around .80 or 80% is considered high risk.
Money invested by the business’ owners: When a business is first started, its owners (sole traders or shareholders, for example) may invest money into the business, resulting in a cash flow. Cash Inflows Establishing the business: Starting a new business requires a number of one-off payments, such as advertising the new business and buying equipment
Common stock usually entitles the owner aka, shareholders the right to vote and collect dividends. Preferred stockholders do not vote, however, they claim a higher yield on assets and earnings than the common shares. Bond: A financial instrument issued by corporations, federal and local governments issued for the purpose of raising capital; a debt security that promises repayment with interest. Capital; the simplistic definition is money. Capital is used to generate income, capital, or money is used to make investments that will generate more income.